Section 8 of the Indian Contract Act applies to cases where a cheque is sent with the condition of full and final settlement, and cashing the cheque without repudiating the condition constitutes acceptance of the proposal and the terms of the settlement.

The short though somewhat vexing question that arises for determination in this second appeal filed by the Union of India relates to the interpretation of Section 8 of the Indian Contract Act. Another consequential question that falls for decision is whether the provisions of that section apply to the facts of this case. The two courts below have concurrently held that Section 8 is not attracted to the facts of the case.

2. The plaintiffs-respondents M/s Rameshwarlall Bhagchand had imported 210 bags of ground-nuts in 1963 by railway from Risia to Gauhati and when they took delivery of the consignment on 26-7-1963 at the latter station, the consignment was found to be so damaged as not to be fit for human consumption. A certificate to that effect was issued on 26-8-1963 by the Railway officer concerned to the consignees. The dispute about compensation having not been immediately settled, the consignees served a notice on the Railway Administration claiming compensation in the sum of Rs. 2368.25. The General Manager, N. F. Railway, Pandu, sent on 5-5-1964 a cheque in the amount of Rs. 1173.19 to the consignees along with a letter stating that the cheque was being sent in full and final settlement of the claim. The consignees cashed the cheque but subsequently communicated to the General Manager, by their letter dated 29-7-64, that the cheque received satisfied only a part of the claim made by them and that consequently he (the General Manager) should reopen the case and remit the balance sum of Rs. 1195.06. It was stated further in that letter that if the balance amount was not paid legal steps should be taken to realise the same. The General Manager having failed to make payment of the balance money claimed by the consignees, the latter filed a suit for recovery of Rs. 1200.00. made up of the balance amount of Rs. 1195.06 and Rs. 4.94 by way of interest.

3. The defendants resisted the suit primarily on the basis that the cheque of Rs. 1173,19 having been sent on the term that it represented full and final settlement of the claim and the plaintiffs having cashed the cheque, they were not entitled in law to claim any further amount.

4. The trial Court rejected the defence plea on the ground that there was no documentary evidence indicating that the plaintiffs had accepted the cheque in full and final settlement of the claim and that the plaintiffs were actually entitled to the recovery of the balance amount claimed by them. The Assistant District Judge held in the appeal filed by the defendants that the plaintiffs having communicated to the General Manager immediately after receipt of the cheque that the balance sum of Rs. 1195.06 was still due to them, they cannot be said to have waived the claim to the amount.

5. Shri P. P. Duara submitted for the appellants that the case falls within the ambit of Section 8 of the Contract Act, and urged on the authority of the decisions in Amrit Banspati Co. Ltd. v. Union of India, AIR 1966 All 104, Behari Lal v. Radhye Shyam, AIR 1953 All 745, Sunder Lal v. Ram Krishan, AIR 1960 All 544, that the Courts below had legally erred in decreeing the suit. Shri N. M. Dam representing the plaintiffs-respondents, canvassed on the other hand that Section 8 has no applicability to the facts of the case and to support that contention he placed reliance on S. Tin Factory (P) Ltd. v. S. W. F. Product Co., AIR 1965 Cal 541 Dipchand v. M. Abhechand and Co., AIR 1962 Cal 166, Union of India v. J. J. Patel and Co., AIR 1960 Pat 30, and Kapurchand v. Himayatalikhan, AIR 1963 SC 250.

6. Section 8 provides that performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. According to Section 2 (a) of the Contract Act when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is